Good morning,
DXH0 97.160 +0.082 GCG0 1554.3 -5.8 ESH0 3276.00 +11.25 CLG0 59.13 +0.09
There is a positive sentiment to start the week, following Friday’s softer than expected payrolls report. The prevailing sentiment is that the economy is still moving in the right direction. This week brings the expected signing of Phase 1 of the trade deal, along with a fresh look at inflation, retail sales and housing. Gold prices are retreating, as some safe haven protection is being unwound with the Middle East tension continuing to calm. The same holds true for oil, which finds its price hovering around the $59 mark. As tensions appear to pull back, oil will again focus on the production quota agreements out of OPEC+ in December, and monitor the adherence to the agreements. Global economic prospects will continue to weigh on expectations for future oil demand, thus pushing and pulling at prices.
Friday brought a fresh look at supply and demand for the grain markets with the WASDE report. On the production side, the yield, and hence production numbers, were raised for both corn and soybeans. Not only were the production figures higher than in December, but they also beat the estimates pretty well. However, when looking at inventories, especially for corn, the numbers came in lower than December, but higher than the estimates. Wheat inventories also had lower numbers, both at the domestic and global level. Soybeans had no change to domestic stocks, but saw an increase in the global stock figure. Lower global demand, especially following the African Swine Flu epidemic of last year, and with some signs of it showing up again this coming year, playing a role here. The markets took this news in stride, and closed slightly higher for the session. Wheat prices were also aided by the planting survey numbers coming in lower than for 2019. It should be noted this number, while lower, was also higher than what was expected. Cotton also had a reduction to the production estimate, both domestically and globally, while seeing inventory numbers for both lowered by more than what was expected. Cotton prices ended higher for the session.
The coffee market traded higher on Friday, also on the notion of easing Middle East tensions not being a drag on demand for goods. Coffee also saw some short covering taking place, following the large move down over the past few weeks, and having had another leg down on Thursday following the report that Brazil appeared to be on pace for a very big production season. The strength of the dollar today is applying some pressure back to coffee prices this morning. The dollar is also weighing other commodity prices this morning as well. All of the commodities are also waiting for the official signing of Phase 1 to the trade deal. The exception to lower commodity prices remains in sugar, where continued expectations of cane millers focusing on ethanol production over sugar production keeps future supply deficit concerns alive. Also impacting supply are crop risks in India and Thailand, along with the USDA reporting domestic sugar production being lower than what the market expected.
Friday afternoon saw the most recent look at fund positioning from the CFTC in the COT report. The data is collected as of last Tuesday, but it did show funds still carrying a decent sized short position in corn. The size of the spec short in sugar doubled, from 10k to over 20k, which could be assisting in keeping sugar prices bid as well, as funds try to get those shorts back.
Technical Moving Averages:
Product 50 day 100 day 200 day
SH0 928.75 926.50 921.50
CH0 384.25 386.75 405.50
WH0 532.25 514.25 513.75
KWH0 449.00 435.75 458.25
MWH0 532.00 535.50 550.75
SMH0 304.3 305.4 311.0
BOH0 32.53 31.29 30.26
CLG0 58.64 56.62 57.23
GCG0 1494.2 1506.0 1441.7
LHG0 70.090 71.995 75.750
LCG0 125.455 119.870 118.555
KCH0 120.55 111.10 108.85
CCH0 2545 2473 2443
CTH0 66.81 64.40 66.52
SBH0 13.07 12.71 13.03
JOH0 101.00 103.25 108.80
HGH0 273.15 267.35 271.45
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404